Kodak stock soars after federal investigators say no wrongdoing by agency that approved $765M Kodak COVID-19 loan

Kodak stock soars after federal investigators say no wrongdoing by agency that approved $765M Kodak COVID-19 loan

Sean Lahman

| Rochester Democrat and Chronicle
Trump: Kodak gets loan to bolster drug supplyPresident Donald Trump announces Eastman Kodak will receive a loan to help booster the country’s drug supply. (July 28)Federal investigators have determined there was no wrongdoing in the procedure for approving a $765 million loan to the Eastman Kodak Company to jumpstart the production of COVID-19-related drugs.That’s the conclusion of an assessment submitted to Sen. Elizabeth Warren (D-Mass) last week by the U.S. International Development Finance Corp. and first reported Sunday by the Wall Street Journal.DFC’s Inspector General Anthony Zakel found no evidence that employees of the agency had any conflicts of interest in the process, and Zakel did not find “any evidence of misconduct on the part of DFC officials.”The loan, announced with fanfare in July, would have helped the former photo giant to begin producing large quantities of pharmaceutical ingredients to be used in the fight against the coronavirus pandemic.COVID-19 relief: Proposal doesn’t offer $1,200 checks, but provides extra $300 in federal unemployment benefitsCostco senior hours update: Several clubs have varying special hours for seniors, most vulnerable amid COVID-19Kodak CEO Jim Continenza said then the move would create at least 350 new jobs, launching a new business unit for Kodak that – when at peak production in four to five years – could produce 25% of the active ingredients for “non-biologic, non-antibacterial, generic pharmaceuticals.” But the announcement raised questions almost immediately, and within days the DFC announced that the loan process had been suspended. It remains on hold.Among them were questions about whether Kodak met the minimum requirements for the DFC loan program and whether the political pressures to announce the loan violated any of the agency’s internal policies.The Inspector General concluded that there had been no evidence of conflicts of interest or official misconduct.”The record is abundantly clear and the independent IG review confirms that DFC followed its standard process, under its standard timeline, driven by career finance professionals,” a DFC spokesman told the Journal.SEC also investigating KodakThe report did not address other allegations of wrongdoing, including the sale of millions of dollars in Kodak shares as stock prices skyrocketed in the days after the announcement.  The Securities and Exchange Commission is also conducting an investigation, but Kodak’s own internal investigation cleared its executives of any wrongdoing.Continenza received a large share of stock options just before the loan announcement, which raised questions about whether he was the beneficiary of insider trading knowledge. But a firm contracted by Kodak determined that Continenza was presented the options while the status of the loan was very uncertain and there was nothing untoward with the transaction.Company officials did later acknowledge that internal control “deficiencies” wrongly allowed five former executives to sell about $5.1 million in stock options. A federal regulatory filing in October showed that the employees cashed in about 300,000 shares that had previously been forfeited. Kodak is trying to recover the money, partly with tax withholding, but acknowledges in its filing with the Securities and Exchange Commission that “there are no assurances the Company will be successful in its claims against the ex-employees or in its recovery of the withholding taxes.”Continenza said in October that Kodak would move ahead in making drug ingredients regardless of whether it receives government assistance.Sean Lahman is a watchdog reporter for the Democrat & Chronicle, part of the USA Today Network.  Contact him at slahman@gannett.com and follow him on Twitter @seanlahman.


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